The Government is hoping that reducing the bankruptcy term to one year from three will put further pressure on the banks to engage with the personal insolvency regime.
The Attorney General, Máire Whelan SC, has been asked to draft a new bankruptcy Bill that will involve a reduced bankruptcy term but sharply increase the penalty for hiding assets or not co-operating with the process.
Whereas at present the three-year term can be increased up to eight years in cases of concealing assets, the new regime will allow for the term to be increased to 15 years where the courts have found that a bankrupt has been cheating.
The new Bill is to also provide that bankrupts will not have to attend court for statutory hearings. At present, most bankrupts attend court twice. So while the new regime will most likely increase the number of people applying for bankruptcy, the increased volume will be offset against the reduced number of appearances in terms of pressure on the courts.
Minister for Justice and Equality Frances Fitzgerald brought the heads of a proposed Bill and general policy points to Cabinet yesterday where it was agreed that the Attorney General would draft a Bill. It will incorporate a Bill already drafted by Labour Party TD Willie Penrose.
Ms Whelan has been asked to provide that there be a six-month period of transition for people already in the bankruptcy process. This should mean that people already in the system will be facing an 18-month term.
Last month Ms Fitzgerald signed an order providing for a court review in cases where a creditor had rejected a borrower’s personal insolvency proposal. The order removed the banks’ veto on such measures as, if the court finds in favour of the borrower, it can impose the arrangement on creditors.
Since the introduction of the personal insolvency regime there have been concerns about the banks’ willingness to become involved in the scheme. The Government is hoping that the relatively more attractive bankruptcy terms will make the banks more anxious to engage.
It is also hoping that the less harsh regime will allow entrepreneurs and others to return to making a useful contribution to society.
